Both policies can be required by an outside party: Mortgage lenders generally demand that you have homeowners insurance, and more landlords prefer – if not mandate – that you have renters coverage. However, the two types of policies have a range of differences.
On the surface, it’s easy to tell the main disparity among home and renters insurance. One policy is meant for homeowners while the other is meant for renters. However, there are many other distinctions between the two insurance types, ranging from coverage to cost.
Coverage
Homeowners and renters each have unique needs in regards to insurance coverage. Overall, homeowners need more protection, while renters require less. Why? Because homeowners are solely responsible for their property and renters share responsibility with their landlord. Here’s how the coverage breaks down:
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Dwelling Coverage
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As a homeowner, dwelling coverage is vital. This is what pays to rebuild your home in the event it is damaged or destroyed by a covered peril such as fire or wind.
Standard homeowners insurance policies will include dwelling coverage. Standard renters insurance policies, on the other hand, do not include this coverage. That’s because the structure of a rented dwelling would be covered separately by your landlord or apartment complex. A renter’s big concern is protecting the things inside his or her dwelling. That’s where personal contents coverage comes in.
Personal Contents Coverage
Standard home and renters insurance typically include personal contents coverage. This is what protects all of your personal belongings, from electronics and furniture to clothes and jewelry. Landlord policies generally do not protect a tenant’s personal belongings, which is why renters insurance is so important. While you may not be investing in your dwelling, the stuff inside of it can be valuable.
The average renter, according to a 2012 Allstate survey, owns $30,000 of personal property. Depending on the type of policy you have, deductibles and limits will vary so make sure you check with your insurance provider. Either way, homeowner or renter, personal contents coverage is something you want.
Liability Coverage
Aside from dwelling and personal contents coverage, there’s another big thing that both renters and homeowners have to worry about – liability. Let’s say someone comes over and breaks a leg slipping on a throw rug, or gets bitten by your dog. You could be held personally liable for those incidents and end up paying big medical bills and legal damages.
Luckily, most standard home and renters policies include this coverage. It can help with medical costs and legal fees and awards.
Flood Coverage
Home and renters insurance policies include protection from a variety of perils, including theft, fire, wind, hail and more. Floods, however, are not covered by either. Flood insurance must be purchased separately.
If you are a homeowner and weren’t required to purchase flood insurance by your mortgage lender, you should still strongly consider purchasing it. If you are a renter, it depends. If you live on the first floor of your apartment building, it may be wise to consider it. However, if you are on the fifth floor, it’s probably not necessary. For more information about purchasing flood insurance, visit FloodSmart.gov.
Cost
Another big difference between home and renters insurance is cost. According to the National Association of Insurance Commissioners, the average renters insurance policy costs between $15 and $30 per month. In comparison, the average cost of home insurance is close to $80 per month or $1,000 per year.
Why the disparity? Home insurance provides coverage for the dwelling whereas renters insurance does not. Keep in mind, there are many cost factors when buying both renters and home insurance. Some of those factors may include location, square footage and claims history.
Ways to Save
Whether you are buying home or renters insurance, there are a few easy ways to save money. First, shop around. Comparing quotes from multiple insurance providers can help you find the best price. Just make sure you are comparing similar coverage types, limits and deductibles for the most accurate results.
Next, utilize discounts. Home and renters insurance providers often give discounts for things such as bundling with an auto policy, having a security alarm or living in a non-smoking household. Discounts vary greatly according to provider and state.
In the end, homeowners and renters alike should make insurance a priority. They may have different needs, but the goal is the same: you want to protect the life you’ve worked hard to provide, which includes yourself, your belongings and the place you call home.
About Samantha Alexander
Samantha Alexander writes for HomeownersInsurance.com, an online insurance resource for homeowners and drivers across the country. Offering comparative automobile and homeowners insurance quotes, consumers rely on HomeownersInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeownersInsurance.com blog, Square One, provides tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.
Note: This is a guest post; the views and opinions expressed are those of the author and do not necessarily reflect the opinion or position of Redfin.
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